Turkey launches plan against surging inflation

10% discount of all goods that make up inflation basket is one of the measures

Photo: EPA Turkish Finance Minister Berat Albayrak.

The Turkish government revealed measures aimed at reining in double-digit inflation that has helped erode investor confidence in the country and contributed to a sharp depreciation of the currency this year. On Tuesday Turkish Finance Minister Berat Albayrak introduced a series of solutions that the government hopes will bring down inflation, which stood at nearly 25% in September, compared with just under 18% for the month before, pushing inflation figures to a 15-year high. Gains in producer prices have soared at nearly double that pace.

With very few pain-free measures available, the authorities are increasingly resorting to market interventions, from restricting the use of derivatives to demanding that banks charge below-market interest rates for home loans. Other steps include banning the use of foreign currencies in property sales and rentals, blocking price hikes in bread, and state banks selling subordinated bonds to the nation’s unemployment fund to shore up capital.

Under the program, that declares “all-out war” on inflation, Turkey’s private sector has agreed, for example, to cut prices on its goods by at least 10 percent across the board, Albayrak said, as he called on businesses “to join a national struggle to tame soaring inflation.”

“The fight against inflation and for price stability is not a fight that can be conducted by the state and institutions alone,” the minister noted, warning that if companies try to increase profits under the current circumstances, they would face greater losses in the near term. Yet, It was not immediately clear how many goods would ultimately be impacted or how many companies would take part. For now, Turkey’s state-run Meat and Milk Board (ESK) was one of the first enterprises that announced it would make a 10 percent discount in the prices of some products as of 9 October.

“As of today, Gübretaş will apply a 10 percent cut in prices of a series of liquid and powder fertilizers,” Agriculture and Forestry Minister Bekir Pakdemirli said.

The new program also includes a freeze on energy prices until the year-end and an acceleration of VAT rebates. The banks will furthermore give a 10 percent discount to high-interest loans given after 1 August.

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